Income Tax Accounting Policy

Deferred tax assets and liabilities are recognized based on temporary differences between financial statement basis and tax basis of assets and liabilities using presently enacted tax rates. All deferred tax assets and liabilities are classified as long-term. Deferred tax assets are evaluated to ensure the asset will be realized. To the extent Express Scripts does not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established.

Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.

Express Scripts Holding Co.’s noncurrent deferred tax assets (included in Other assets) increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

Noncurrent deferred tax liabilities

Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.

An activity ratio calculated as total revenue divided by adjusted total assets.

Express Scripts Holding Co.’s adjusted total asset turnover improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

Adjusted financial leverage

A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.

A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.